Assume the Fed is trying to de ter 17 Mon nciawwnortoncom18

Assume the Fed is trying to de × ter 17, Mon, ncia.wwnorton.com/18284 mazon.com: Onlin.... Google YouTube N Netflix User Dashboard MMUnet Login Page . TwitchImported From Safari e Federal Reserv... Smartwork5 71% 0 This is a Numeric Entry question/ It is worth 1 point/ You have unlimited attempts/There is no attempt penalty a See page 543 Question (1 point) 5th attempt See Hint Assume the Fed is trying to decide whether to lower the required reserve ratio to 8%. Currently, the required reserve ratio is 10%. If banks keep no excess reserves, how much morewould the money supply increase if the Fed lowers the reserve ratio when someone deposits $300 into a checking account? 4th attempt 3rd attempt SUBMIT ANSWER K 12/15 > VIEW SOLUTION 11OF 15 QUESTIONS COMPLETED MacBook Pro G Search or type URL

Solution

ANSWER:

With a reserve ratio of 10% , the money multiplier is 1 / 10% = 10 , therefore the $300 deposit will cause the money supply to increase by $300 * 10 = $3,000

with a reserve ratio of 8% , the money multiplier is 1 / 8% = 12.5 , therefore the $300 deposit will cause the money supply to increase by $300 * 12.5 = $3,750

Therefore , lowering the reserve ratio from 10% to 8% , the money supply will increase by $3,750 - $3,000 = $750